Assembly Bill 5 (“AB-5”), which became effective January 1, 2020, put into law the “ABC” test to determine whether a worker should be classified as an employee and all of its implications, including labor protection and benefits, or as an independent contractor without basic protection. Proposition 22 (“Prop 22”)., the costliest ballot measure in California history, undoes what AB-5 did by claiming gig workers want independence and do not want to be classified as employees. Here is what you need to know regarding the ballot.
Prop 22 works in favor of gig companies. The ballot was backed by more than $200 million from the Gig giants – Uber, Lyft, Doordash, Instacart, and Uber-owned Postmates. The ballot ensures that drivers – both delivery and ride-hail – will remain independent contractors and as such, the companies do not need to invest in costly benefits like minimum wage, paid sick leave, or unemployment insurance. What this means for gig companies is that they can continue to grow and scale at a minimum cost. Workers will continue to have flexibility to work per their preferences and the companies are only responsible of granting minimum earnings guarantee for hours workers are “engaged”, meaning the time when workers are driving a client or making a delivery — the time a driver spends waiting remains unpaid. Further, workers will remain without traditional employment rights. Not only will they not be able to earn a minimum wage, but they also will not have benefits, Social Security, workers compensation, family leave or the ability to unionize.
Prior to Election Day, a California appeals court had instructed Uber and Lyft to reclassify their drivers from independent contractors to employees per AB-5. The order had been in place since August and both Uber and Lyft fought and continued to appeal the ruling. All this put more pressure on the outcome of Prop 22 and as a result, the gig companies put everything into convincing workers and voters that Prop 22 was the most beneficial solution, claiming that “Prop 22 will protect drivers’ preference to be independent contractors with the flexibility to work when, where, and how long they want.” Critics of Prop 22, however, argue that it undermines everything that AB-5 did to protect workers from being exploited by gig companies. Per a tweet from a coalition of gig workers opposing Prop 22, “Billionaire [corporations] just hijacked the ballot measure system in CA by spending millions to mislead voters. Uber, Lyft, & the other gig [companies] took a ballot measure system meant to give voice to ordinary Californians and made it benefit the richest [corporations] on the planet.”
Uber, Lyft and others like them are likely to now bring their fight to other states. This will not only affect the gig company workers covered by Prop 22, but expectation is that this will be the beginning of a snowball effect that would expand across the board to the delivery and transportation industries.
If you are curious about how this will impact your workers compensation policies, please contact your Sequoia Risk Advisor, or connect with them in HRX.
Disclaimer: This content is intended for informational purposes only and should not be construed as legal, medical or tax advice. It provides general information and is not intended to encompass all compliance and legal obligations that may be applicable. This information and any questions as to your specific circumstances should be reviewed with your respective legal counsel and/or tax advisor as we do not provide legal or tax advice. Please note that this information may be subject to change based on legislative changes. © 2020 Sequoia Benefits & Insurance Services, LLC. All Rights Reserved
